Marine Cargo Insurance: The Institute Cargo Clauses, What They Cover, and Where the Gaps Are
- Ravi Shankar FICS
- 8 minutes ago
- 12 min read
Key Takeaways on Marine Cargo Insurance
The Institute Cargo Clauses (ICC): The globally accepted framework for marine cargo insurance is divided into three tiers. ICC(A) offers "all risks" coverage, ICC(B) covers broad named perils, and ICC(C) provides minimum cover for major catastrophic events (like fires or sinkings).
The ICC(C) Cost Trap: Choosing ICC(C) to save on premiums is often a false economy. It specifically excludes common risks like theft, rough handling, and washing overboard, a critical vulnerability given the sharp increase in containers lost at sea due to Cape of Good Hope rerouting.
General Average Security: If a vessel makes a voluntary sacrifice to save the ship (e.g., jettisoning cargo), maritime law dictates that all cargo owners proportionally share the financial loss. Cargo insurance automatically posts the hefty security deposit required to release your goods from the port.
The Strict 60-Day Rule: Under the "Warehouse-to-Warehouse" transit clause, coverage strictly terminates 60 days after the goods are discharged from the vessel. Prolonged customs or port delays can leave cargo completely uninsured unless a specific storage extension is negotiated.
Universal Policy Exclusions: Base ICC policies, even the all-risk ICC(A) explicitly exclude commercial delays, inherent vice (the natural deterioration or spoilage of the cargo itself), and war or strike risks. War coverage requires a separately purchased endorsement.
Unforgiving Claim Timelines: Cargo claims require immediate action, including swift surveyor appointments and carrier notifications. Crucially, any claim not formally submitted within a 12-month limitation period will lapse, regardless of its validity.
QUICK ANSWER: Marine cargo insurance protects the value of goods in transit against loss or damage. The primary framework is the Institute Cargo Clauses (ICC), published jointly by the Lloyd’s Market Association (LMA) and International Underwriting Association (IUA). Three tiers exist: ICC(A) providing all-risks cover; ICC(B) covering named perils at an intermediate level and ICC(C) providing the most limited cover for major casualties only. Premiums typically range from 0.1% to 1.5% of cargo value depending on clause, cargo type, and route. The governing statute for most international cargo policies under English law is the Marine Insurance Act 1906.
The Institute Cargo Clauses: Their
Authority and Legal Basis
The Institute Cargo Clauses were adopted in 1982 by the Institute of London Underwriters, the predecessor body to the International Underwriting Association. They were updated by the Joint Cargo Committee, comprising representatives of the LMA and the IUA, in 2008, with revised clauses implemented from 2009. The LMA and IUA publish the clause wordings in their Clauses eLibrary, which is publicly accessible.
The ICC clauses are the accepted global standard for marine cargo insurance for a practical reason: they reflect the accumulated experience and case law of the Lloyd’s market over more than three centuries. When a cargo claim enters arbitration or litigation, the parties are working with clause wordings that have been interpreted in reported cases. That interpretive history reduces ambiguity in disputed situations.
I have sat across the table from underwriters and loss adjusters on cargo claims under all three clause sets, and the difference in claims behaviour between ICC(A) and ICC(C) is far larger in practice than the premium differential suggests.
The Marine Insurance Act 1906 remains the governing statute for marine insurance contracts under English law, which is the default governing law for most internationally traded cargo policies. The Act’s Schedule includes the standard Lloyd’s policy wording then current in 1906. The ICC clauses operate as attachments to a cargo policy, defining the scope of cover.
The three clause sets differ primarily in breadth of covered perils and cost.
Clause | Coverage Type | Key Perils Covered | Key Exclusions | Typical Use Case |
ICC(A) | All risks | All physical loss or damage during transit except named exclusions | Wilful misconduct; inherent vice; delay; war (unless war clause added); strikes (unless strikes clause added) | High-value or fragile cargo; electronics; pharmaceuticals; multi-handling routes |
ICC(B) | Named perils (broad) | Fire; explosion; vessel stranding; grounding; sinking; capsizing; vehicle overturning; collision; discharge at port of distress; earthquake; lightning; washing overboard; entry of sea water; total loss of package at loading or discharge | Theft; pilferage; wilful misconduct; delay; inherent vice | Semi-finished materials; moderately durable cargo on established routes |
ICC(C) | Named perils (limited) | Fire; explosion; vessel stranding; grounding; sinking; capsizing; vehicle overturning; collision; discharge at port of distress only | All perils not specifically named; theft; rough handling; weather damage; washing overboard | Low-value bulk commodities on short routes; premium cost is primary consideration |
Source: Institute Cargo Clauses (A), (B), and (C), 1/1/09 edition; Lloyd’s Market Association and International Underwriting Association.
Counter-Consensus: Choosing ICC(C) to Save Premium Is Rarely the Right Calculation
The standard advice is to match your clause level to your cargo type and route risk profile. The implicit suggestion is that ICC(C) is a rational choice for low-value cargo on short routes. Run the numbers on what ICC(C) actually excludes and the framing falls apart.
The premium difference between ICC(A) and ICC(C) on a standard commercial cargo shipment is typically 0.3-0.8 percentage points of cargo value. On a USD 100,000 shipment, that is USD 300-800. The gap in coverage is substantially larger than that cost difference implies when claims arise.
ICC(C) excludes washing overboard. The World Shipping Council recorded 576 containers lost at sea in 2024, up from a record-low 221 in 2023, and linked the rise directly to a 191% increase in Cape of Good Hope transits as vessels avoided the Red Sea: around 200 of those boxes went overboard off South Africa alone (Containers Lost at Sea Report, June 2025).
The 2026 update put 2025 losses at an estimated 1,478 containers, with one casualty accounting for 640 of them (WSC, June 2026). Cape routing subjects vessels to sea states substantially harsher than the Red Sea leg it replaces. Washing overboard is not a low-probability event in Southern Ocean winter conditions. It is uncovered under ICC(C) unless the entire vessel is lost.
ICC(C) excludes theft and pilferage. A container offloaded at an intermediate transhipment port and found later with tampered seals and missing content produces no claim under ICC(C). Under ICC(A), the theft is covered subject to proof that it occurred during the insured transit.
ICC(C) excludes rough handling during loading and discharge. Cargo damaged by dropped containers or crane incidents at port, one of the most common causes of transit damage claims in practice, is not covered under ICC(C) unless the damage can be characterised as resulting from vessel stranding, sinking, or collision specifically.
The claim analysis should run the expected loss calculation, not just the premium comparison. In my experience the calculation is rarely presented to shippers in those terms.
The Warehouse-to-Warehouse Clause:
When Coverage Begins and Ends
One of the most frequently misunderstood aspects of marine cargo insurance is when coverage begins and ends. The transit clause in ICC policies defines the period of insurance as commencing when goods first move from the named warehouse at origin for the purpose of the insured transit, and terminating on one of three conditions.
Coverage ends on the earliest of: delivery to the named consignee’s warehouse at destination; delivery to any other warehouse at destination that the insured elects to use for storage other than in the ordinary course of transit; or expiry of 60 days after completion of discharge of the goods from the vessel at the final port of discharge.
The 60-day provision at destination is precise and unforgiving. Cargo sitting in a customs bonded warehouse awaiting clearance beyond 60 days after vessel discharge may fall outside transit cover and require a separate storage extension. Container dwell times at congested ports in 2025 extended well beyond 60 days in some markets, particularly at transhipment hubs in the Mediterranean and Southeast Asia. Cargo owners with ICC policies who have not specifically negotiated storage extensions for these markets carry a gap risk they may not have identified.
General Average: The Most Practically Costly Misunderstanding
General average is a principle of maritime law predating the ICC clauses by centuries. It holds that where a sacrifice is voluntarily made to save a vessel and its cargo from a common peril, all parties who benefit from that sacrifice share the loss in proportion to the value of their interest.
In practice, general average arises when a vessel master orders emergency action that involves sacrifice, typically jettisoning cargo, flooding holds to suppress fire, or emergency salvage. The vessel owner declares general average, appoints an adjuster, and requires all cargo interests to contribute to the adjusted cost of the sacrifice before their cargo is released at the destination port.
The critical practical issue is security, not contribution percentage. Cargo without valid marine cargo insurance is required to post a cash deposit or bank security document to secure release of goods pending the general average adjustment. General average adjustments frequently take 12-24 months or longer to complete. A cargo owner without insurance who has sold goods on delivered terms may be in a position where their customer cannot take delivery and their goods are held in a bonded warehouse at the destination port generating storage costs for over a year.
ICC policies include standard general average cover. The insured’s underwriter posts the required security on behalf of the cargo owner, releasing the goods pending adjustment. This provision is operationally valuable far beyond the typical general average contribution percentage.
A Worked Example: Claiming Under ICC(A) for Theft in Transit
The following is illustrative of standard claims procedure and does not represent any specific incident or Shipfinex activity.
Step | Action | Documentation Required |
1. Discovery of loss | Consignee notes tampered seals and shortfall at delivery; notes exception on delivery receipt immediately | Signed delivery receipt noting shortage; photographs of seal and container |
2. Survey appointment | Insured or agent appoints a marine surveyor within 48-72 hours to inspect and report | Surveyor’s report; survey appointment record |
3. Carrier notification | Written notice of claim sent to carrier (bill of lading carrier) within applicable time limits | Written notice; carrier acknowledgment |
4. Police report | Local police report filed where theft or criminal damage is alleged | Police report reference number |
5. Claim submission | Claim submitted with supporting documents to insurance broker or direct underwriter | Commercial invoice; packing list; bill of lading; survey report; carrier correspondence; police report; delivery receipt |
6. Underwriter assessment | Underwriter reviews; may appoint their own adjuster for larger claims | Underwriter’s adjuster report where appointed |
7. Settlement | Insured receives indemnity for value of stolen goods subject to policy limit and any applicable deductible | Settlement agreement |
Key time limit: Cargo claims under ICC policies are typically subject to a 12-month limitation period from the date of the event giving rise to the claim. A claim not submitted within this period lapses regardless of merit.
War and Strikes Cover: What the Base Clauses Exclude
The base ICC(A), (B), and (C) clauses exclude war risks and strikes risks. These are covered by separate Institute War Clauses (Cargo) and Institute Strikes Clauses (Cargo), which attach to the policy for additional premium.
In the context of Red Sea routing since late 2023, this exclusion has been commercially significant. Cargo on vessels that continued to transit the Red Sea required specific war cover, and war risk premiums for that transit stayed elevated through 2025. Most shippers took the other path. I do not recall a single client in 2025 who chose to buy Red Sea-specific war cover over the Cape rerouting option.
Cape routing became the operational war risk mitigation, and from a commercial chartering perspective that was the rational choice. It simply traded a war peril for a weather peril, which is exactly why the ICC(C) washing overboard exclusion discussed above matters more now than it did in 2023.
The June 2025 Iran-Israel conflict temporarily raised concerns about the Strait of Hormuz and whether war risk exclusions would be triggered for vessel policies in that corridor. This is a standard example of how geopolitical events interact with the base policy exclusions in ways that require active underwriting attention rather than reliance on passive policy terms.
Marine Cargo Insurance and Maritime Asset Tokens
Marine cargo insurance insures the goods transported by vessels. It is distinct from hull and machinery insurance, which covers the vessel itself, and from P&I insurance, which covers the vessel operator’s third-party liabilities.
Shipfinex FZCO, operating under VARA In-Principle Approval (IPA/26/01/002), structures Maritime Asset Tokens (MATs) that represent economic exposure to vessel-owning Special Purpose Vehicles. An IPA is not a full operational licence and is subject to completion of final regulatory requirements.
Cargo insurance is relevant to MAT holders indirectly. Vessels with a consistent record of safe cargo delivery and clean survey results attract charterers and generate the revenue stream from which, where distributions are declared by the SPV, they are paid to token holders transparently and on-chain. A vessel whose cargo claims history raises underwriting concerns faces higher operational costs. MAT values may decline materially below purchase price. Secondary market liquidity for MATs is limited; early exit may not be possible.
Frequently Asked Questions
What is the difference between ICC(A), ICC(B), and ICC(C)?
ICC(A) provides the broadest cover: all risks of physical loss or damage during transit, except for named exclusions. ICC(B) covers a defined list of named perils including fire, vessel casualty, washing overboard and entry of sea water. ICC(C) is the most limited, covering only the most serious casualties such as fire, explosion, stranding, grounding, sinking, capsizing, collision and discharge at a port of distress. Premiums are generally highest for ICC(A) and lowest for ICC(C).
Is marine cargo insurance compulsory?
Marine cargo insurance is generally not legally compulsory for seaborne shipments, though some trade finance instruments require it. Incoterms CIF and CIP require the seller to arrange and pay for insurance. For other Incoterms such as FOB and CFR, the buyer bears the risk from the point of loading and should arrange their own cover. Some countries’ import regulations require insurance from a local insurer for certain categories of goods.
What is general average and how does cargo insurance help?
General average is a maritime law principle requiring all cargo interests on a voyage to contribute to losses incurred when a voluntary sacrifice is made to save the ship and cargo from a common peril. A vessel master declaring general average requires each cargo owner to provide security before cargo is released at destination. Marine cargo insurance covers the insured’s general average contribution and, critically, provides the security required to secure cargo release without the cargo owner having to post cash.
How long does a marine cargo insurance claim take to settle?
Simple, well-documented cargo claims typically settle within 4-8 weeks of submission of a complete claims file. Complex claims involving disputed cause of loss, large values, or general average adjustments can take 12-24 months. General average adjustments frequently take over a year to complete. The 12-month limitation period from the date of the event is the primary risk for claimants who delay submission.
What documents are needed to make a cargo insurance claim?
A standard marine cargo claim requires: commercial invoice; packing list, bill of lading, the insurance certificate or policy, a marine survey report from an appointed surveyor, a delivery receipt noting the exception or shortage, correspondence with the carrier and, where applicable, a police report for theft claims or port authority documentation for port-related incidents.
Does marine cargo insurance cover delay?
No. Delay is explicitly excluded from all three Institute Cargo Clauses. ICC(A), (B), and (C) all state that loss or expense proximately caused by delay is excluded, even when the delay results from an insured peril. Consequential losses from late arrival of goods, including missed sales or contractual penalties for late delivery, are not recoverable under standard cargo policies.
What is the warehouse-to-warehouse clause?
The transit clause in ICC policies defines when coverage begins and ends. Coverage starts when goods leave the named warehouse at origin for the purpose of the insured transit. Coverage ends on the earliest of: delivery to the consignee’s named warehouse at destination; use of an alternative storage location by the insured; or expiry of 60 days after completion of vessel discharge at the final port. Cargo awaiting customs clearance beyond 60 days after discharge may fall outside policy cover without a specific storage extension.
Are war risks covered under standard marine cargo insurance?
No. War risks and strikes risks are excluded from the base ICC clauses. They are covered by separate Institute War Clauses (Cargo) and Institute Strikes Clauses (Cargo), attached to the cargo policy for additional premium. In 2025, war risk premiums on Red Sea routing were elevated. Most shippers chose Cape of Good Hope rerouting rather than acquiring specific Red Sea war cover.
What is inherent vice and why is it excluded from cargo insurance?
Inherent vice refers to natural deterioration or damage arising from the intrinsic nature of the cargo itself, not from any external cause. Examples include rust on steel without external moisture exposure, fruit ripening and spoiling, or ammunition in poor original condition. Because inherent vice represents a characteristic of the goods rather than an insured peril, it is excluded from all three ICC clause sets. The exclusion is designed to prevent cargo insurance from becoming a quality indemnity for the goods rather than a transit risk tool.
What is the legal basis for cargo insurance under English law?
The Marine Insurance Act 1906 is the governing statute for marine insurance contracts under English law, which is the default governing law for most internationally traded marine cargo policies. The Act’s Schedule includes the standard Lloyd’s policy wording then current in 1906. The ICC clauses operate as attachments to a cargo policy, modifying and defining the scope of cover in addition to the base policy terms. English courts and the London arbitration community have extensive case law interpreting ICC clause wordings.
Glossary
ICC: Institute Cargo Clauses. Standardised insurance terms governing marine cargo policies, published by the LMA and IUA.
All risks (ICC(A)): Cover for all physical loss or damage during transit except named exclusions. The term “all risks” does not mean literally all risks; the named exclusions are substantial.
Named perils (ICC(B) and ICC(C)): Cover only for the specific perils listed in the clause; no cover for unlisted perils.
General average: Maritime law principle requiring all cargo interests to share in losses incurred by voluntary sacrifice to save ship and cargo from a common peril.
Inherent vice: Natural deterioration or damage arising from the intrinsic nature of the cargo, excluded from all ICC policies.
War clause: Institute War Clauses (Cargo): separate cover for loss arising from war, warlike operations and related perils. Not included in base ICC policies.
Survey: Inspection of damaged cargo by an appointed marine surveyor to determine cause and extent of loss.
Insurable interest: The financial interest a party must have in the cargo at the time of loss for a valid insurance claim.
Subrogation: Insurer’s right, after settling a claim, to pursue recovery against the party responsible for the loss in the insured’s name.
LMA and IUA: Lloyd’s Market Association and International Underwriting Association: joint publishers of Institute Cargo Clauses and other standardised insurance terms.
Transit clause: The provision in ICC policies defining the period of insurance from warehouse at origin to warehouse at destination, with the 60-day post-discharge time limit at destination.
Ravi Shanker
Co-Founder & CCO, Shipfinex
Ravi Shankar FICS is Co-Founder and Chief Commercial Officer of Shipfinex, and General Secretary of the ICS Middle East Branch. A Fellow of the Institute of Chartered Shipbrokers with extensive experience in ship sale and purchase, chartering, and maritime consultancy, he has previously held senior roles at Maersk Broker and Eastgate Shipping DMCC. His day-to-day commercial work spans dry bulk and tanker market analysis, SnP transactions, and shipbroking advisory.
